A lot of the writing about “royalty” investing is meant from the point of view of passive, public-markets investors (e.g. with oil & gas MLPs). But when folks start looking for information about royalty with the qualifier “no dilution,” you can bet it’s in the context of a trade-off between royalty-based (or revenue-based) financing vs. equity (dilutive) financing.

So, what is it about royalty / revenue financing (RBF) that makes it non-dilutive to equity holders?

There’s a difference between traditional venture capital and corporate venture capital. While standard VCs are primarily concerned with financial goals (i.e. a high IRR%), corporate venture capital (CVC) groups such as Intel Capital, GE Capital, and the J&J Development Corp. have dual goals: financial and ‘strategic’ value. CVC investments must somehow assist the core business of their parent companies in addition to creating financial returns. Read more of this post